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Pricing Vulnerable Options with Market Prices of Common Jump Risks under Regime-Switching Models
Joint Authors
Han, Miao
Shengwu, Zhou
Song, Xuefeng
Niu, Huawei
Source
Discrete Dynamics in Nature and Society
Issue
Vol. 2018, Issue 2018 (31 Dec. 2018), pp.1-15, 15 p.
Publisher
Hindawi Publishing Corporation
Publication Date
2018-01-21
Country of Publication
Egypt
No. of Pages
15
Main Subjects
Abstract EN
This paper investigates the valuation of vulnerable European options considering the market prices of common systematic jump risks under regime-switching jump-diffusion models.
The way of regime-switching Esscher transform is adopted to identify an equivalent martingale measure for pricing vulnerable European options.
Explicit analytical pricing formulae for vulnerable European options are derived by risk-neutral pricing theory.
For comparison, the other two cases are also considered separately.
The first case considers all jump risks as unsystematic risks while the second one assumes all jumps risks to be systematic risks.
Numerical examples for the valuation of vulnerable European options are provided to illustrate our results and indicate the influence of the market prices of jump risks on the valuation of vulnerable European options.
American Psychological Association (APA)
Han, Miao& Song, Xuefeng& Niu, Huawei& Shengwu, Zhou. 2018. Pricing Vulnerable Options with Market Prices of Common Jump Risks under Regime-Switching Models. Discrete Dynamics in Nature and Society،Vol. 2018, no. 2018, pp.1-15.
https://search.emarefa.net/detail/BIM-1152876
Modern Language Association (MLA)
Han, Miao…[et al.]. Pricing Vulnerable Options with Market Prices of Common Jump Risks under Regime-Switching Models. Discrete Dynamics in Nature and Society No. 2018 (2018), pp.1-15.
https://search.emarefa.net/detail/BIM-1152876
American Medical Association (AMA)
Han, Miao& Song, Xuefeng& Niu, Huawei& Shengwu, Zhou. Pricing Vulnerable Options with Market Prices of Common Jump Risks under Regime-Switching Models. Discrete Dynamics in Nature and Society. 2018. Vol. 2018, no. 2018, pp.1-15.
https://search.emarefa.net/detail/BIM-1152876
Data Type
Journal Articles
Language
English
Notes
Includes bibliographical references
Record ID
BIM-1152876